Lawsuit accuses IRS of neglecting political groups

A former Illinois congressional candidate is suing the Internal Revenue Service, claiming that the agency has allowed secret-money political non-profit groups to proliferate in violation of federal law.

Former emergency room physician David Gill, a Democrat, and the watchdog group Citizens for Responsibility and Ethics in Washington (CREW) filed suit Tuesday in U.S. District Court.

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The suit charges that political nonprofits, which don’t disclose their donors, are not operating “exclusively for purposes beneficial to the community as a whole” — a requirement under federal law. It wants the court to strike down current IRS rules.

It could open the door for a major judicial review of nonprofit groups — groups that have spent hundreds of millions in the last few cycles trying to influence elections. Major outside groups like Karl Rove’s Crossroads GPS, Americans For Prosperity, and President Barack Obama’s Organizing For Action would all be affected by any major changes to the current rules governing nonprofits.

Gill — who ran and lost in the Illinois 13th congressional district House race in 2012 — was targeted by former Sen. Norm Coleman’s nonprofit American Action Network. The outside group poured more than $1.5 million into Gill’s race, claiming in ads that he was a “mad scientist” and that he would eliminate Medicare.

“This is a tired long-since settled argument from a George Soros-tied left-wing front group and a failed candidate with an extreme ideology, looking to blame anyone but himself for losing his fourth-straight congressional election,” said Dan Conston, a spokesman for American Action Network.

“The American Action Network’s significant advocacy efforts for center-right causes are well-established, and the network continues to keep its primary focus on those non-electoral activities, as required by law,” said Conston.

CREW and Gill allege that current IRS regulations about political nonprofits are in conflict with the law. According to the suit, the law requires 501(c)4 groups to be operated “exclusively” for social welfare purposes. But the IRS has interpreted that law to mean “primarily engaged” in social welfare, allowing some outside political activity.

In practice, many nonprofits and election attorneys have interpreted the rules to mean that they can spend up to 49 percent of their time on campaign related activity, while keeping their tax exempt status and the ability to keep donors secret.

“Disgracefully, the IRS has sat on its hands for the last two election cycles while 501(c)4 groups have been formed expressly to run negative attack ads funded by anonymous donors. When called out, the IRS has said only that it is ‘aware’ of the public’s concern. Now the IRS can explain its deplorable inaction in federal court,” CREW executive director Melanie Sloan said in a release